Mortgage stress and home loan arrears have climbed in recent months as the Reserve Bank of Australia (RBA) hiked the cash rate to an 11-year high.

An estimated 1.43 million Australians – nearly 29% of mortgage holders – were ‘at risk’ of mortgage stress in June, according to Roy Morgan.

That’s half a million more than a year ago and the highest the figure has been since May 2008 amid the Global Financial Crisis (GFC).

Meanwhile, the number of overdue mortgage accounts surged last quarter, the latest Equifax Quarterly Consumer Credit Insights report found.

“The effects of multiple interest rate rises are becoming more evident,” said Kevin James, Equifax general manager of advisory and solutions.

“We are seeing accelerated growth in mortgages in early arrears.”

The number of accounts overdue by up to 29 days rose by 36% over the year to the June quarter, while those overdue by between 30 days and 89 days increased 33%.

Australian homeowners aren’t yet feeling the same mortgage pinch as they were in the midst of the GFC, when 35.6% were at risk of mortgage stress.

But that could soon change, as many of the big banks expect the cash rate will be lifted again from August.

“If the RBA does raise interest rates again next week by 0.25% Roy Morgan forecasts mortgage stress is set to increase to over 1.51 million mortgage holders considered ‘at risk’ by August 2023,” Roy Morgan CEO Michele Levine said.

“If there is a sharp rise in unemployment, mortgage stress is set to increase towards the record high of 35.6% of mortgage holders considered ‘at risk’ in May 2008 during the GFC.”

The research company defines an ‘at risk’ homeowner as one who spends between 25% and 45% of their after-tax income on mortgage repayments.

Roy Morgan surveys over 10,000 owner-occupied mortgage-holders each year to make its findings.

It comes after the number of owner-occupiers refinancing their home loans with a different bank hit a record high.

More than $14 billion worth of mortgages were externally refinanced in May, according to the Australian Bureau of Statistic's latest lending indicators.

Fewer Australians applying for credit products

Equifax’s quarterly report also revealed applications for personal loans dropped 5.9% over the 12 months to the June quarter.

However, average limits and credit scores increased year-on-year.

“This could indicate that consumers who previously weren’t feeling financial strain have begun to consolidate their debts, so they can better manage their credit payments,” Mr James said.

Demand for unsecured credit slipped 8.3% last quarter while a 3.3% decline in demand for secured credit was recorded.

Applications for buy now pay later (BNPL) also fell a notable 26.3% last quarter while those for credit cards climbed 5.9%.


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Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
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Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

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